Avoiding Credit May Negatively Affect Your Credit Score

We’ve all heard the mantra, that using too much credit can be bad, and that you should pay with cash whenever possible.

This may be the reason why more and more Americans are using their debit cards for regular purchases.

Thought it is correct that you should live within in your means, it is important to remember that avoiding credit usage all together might negatively impact your credit score as well, which could hurt when you go to make your next big ticket purchase.

Great credit scores only come from having and using an appropriate mix of credit products, which could be loans, credit cards, mortgages, and other lines of credit.

Consumers who avoid credit products, out of prudence or for any other reason, can end up with a low score or what the industry calls a thin file, which is credit report that does not have enough data to assign a score.

Credit companies need to be able to determine what your credit behavior is, in order to assess your risk level in loaning you money. You can learn more about how to see your free credit score.

The bottom line is this, be sure to at least keep some of your credit lines open. So don’t cut up all your credit cards.

Instead of going on a spending spree, pay some regular budgeted items like groceries with a credit card, so that you show a consistent usage of that credit, and then of course, stay current on your payments, and never allow that credit card payment to be late, or grow so large that it breaks your budget.

What’s your thoughts on avoiding credit? Let us know in the comments below.

Related Info

Check out this infographic that Experian created which explains exactly how information gets on your credit report. Source: http://www.experian.com/blogs/ask-experian/2015/05/21/infographic-how-information-gets-on-your-credit-report/